DS Smith to acquire Europac in $2.2bn deal

BY Richard Summerfield

British packaging firm DS Smith is to acquire European rival Papeles y Cartones de Europa, also known as Europac, for $2.2bn, including debt.

The merger will see FTSE 100-listed DS Smith pay €16.80 per Europac share to acquire the company. On Friday 1 June, the last day of trading before the deal was announced, Europac’s shares closed at €15.58.

DS Smith will finance the acquisition by raising $1.3bn from a new share issue, which is expected to launch in June, following the publication of the company’s full-year results. DS Smith will also benefit from a new debt facility of €740m.

The acquisition will be an “exceptional scale opportunity”, according to DS Smith, which will allow the company to enhance its customer offer in a key packaging growth region, as well as strengthen its global supply chain.

Expected pre-tax synergies of €50m have been identified by the company. According to a statement, in 2017 Europac delivered revenue of €868m and posted earnings before interest, tax, depreciation and amortisation of €158m.

Miles Roberts, group chief executive of DS Smith, said: “The acquisition of Europac is a very exciting development for DS Smith, strengthening our position as a leading global supplier of sustainable packaging solutions.  We have a long-standing relationship with Europac, which is a company we have long admired, given the quality of their assets, employees and customers. This acquisition will enhance our customer offer in Western Europe, a key packaging growth region, and help us meet the rising demand for our high-quality packaging and sustainable products. It will also strengthen our global supply chain and means we can serve our, and Europac’s, customers better.”

José Miguel Isidro Rincón, executive chairman of Europac, said: “Europac is a great company, well structured, strongly positioned with its customers and has a great management team. Iberia is the third largest packaging market in Europe and has great growth potential. In my capacity as shareholder, I believe that the offer submitted by DS Smith, which upon implementation would result in a combination with Europac, would deliver important operating and commercial synergies for both companies.”

As there is little overlap between the operations of the two companies, DS Smith expects the deal to win regulatory approval.

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